An unwelcome combination of political uncertainty, soaring oil prices and high interest rates is forcing developers of top-end Bangkok housing estates to cut prices and reassess business strategies.
Industry insiders forecast that developers of luxury housing will likely cut prices by 5 to 10% in the second half. The price cuts would affect units valued at Bt7million and up.
The shrinking demand for housing has led to oversupply, with many developers have been forced to freeze projects. Commercial banks have also become more cautious in offering mortgage loans.
Visanu Thepcharoen, chief executive of luxury developer Nusasiri Co Ltd, said the company had frozen new housing projects and shifted its focus to ensuring current projects were ready for buyers to move into as soon as possible.
He said that 340-rai project on Rama II Road has been frozen, adding that Nusasiri had seven luxury housing projects in Bangkok with average prices of more than Bt10 million per unit.
He said that political and economic uncertainty has been shrinking demand, particularly for units prices Bt10 million and up. Nusasiri’s monthly sales of luxury housing units has dropped from about Bt500 million to about Bt200 million.
He added the company had frozen spending on public relations and marketing and would focus on promotional events within a six-kilometre radius of each housing project.
The company has adjusted its strategy from pre-sale activities before building the houses to making fully finished houses at existing projects and then selling them to customers, he said. Visanu added the company still has unsold housing units at some locations, including 10 units in its Udomsuk project, about five units in its Bang Na project and about 30 units in its Sathorn-Pinklao project.
Visanu said the company will also shift its focus to developing its new hotels and serviced apartments in Pattaya and Phuket, which are expected to generate higher and more immediate returns.
Land & Houses Plc, (LH) the country’s largest residential developer, has cut its 2006 revenue growth target to zero from 10%
“LH expected consumers to continue tightening their belts for the rest of the year,” said Adisorn Thananan-narapool, senior executive vice-president. “First-half sales were lower than a year ago.”
Fourteen analysts polled by Reuters Estimates forecast a 2.5% dip in the company’s 2006 sales to 22.2 billion baht, but an 8% rise to 23.9 billion baht next year.
In the first quarter, LH reported a larger-than-expected 33% fall in net profit.
Mr Adisorn said that LH would proceed with eight or nine new projects this year, mostly detached homes, worth a total of Bt10 billion and funded with cash.
Source: Asia Property Report